A new report from Morgan Stanley predicts AI spending in the health care industry will jump to 10.5% in 2024. Yahoo Finance Health Care Reporter Anjalee Khemlani breaks down the report

Video Transcript

ANJALEE KHEMLANI: Morgan Stanley came out with this report that really supports what we’ve seen in terms of that increase in investment in health care, specifically in drug use. Morgan Stanley predicting that that investment will jump to nearly 11% from 2022, which saw 5.7%. Already 94% of health companies use AI or machine learning in some way according to this report, and the only areas where you’ve seen less use tend to be in medical devices or anywhere where patients are directly involved, such as diagnostics and the like.

We have seen use of that in medical imaging and other areas. Drug discovery, in particular, has been top of mind for the last few years. Morgan Stanley has been covering that and emphasizing the opportunity for investors in this space for the last few years, even prepandemic. They did also have an interesting point about the reason why the opportunity for drugs is so big, saying, quote, every 2.5% improvement in pre-clinical development success rates could lead to an additional 30 plus new drug approvals over 10 years. And doubling that could yield 60 new therapies approved, which would result in $70 billion in value for the industry.

So that’s why the drug industry has been so quick to pick up on this versus other areas of health, which are slower. We saw a perfect example of that during the pandemic with Moderna relying on AWS, that’s Amazon Web Services, for selecting the vaccine that eventually made it to market. So it’s already in use. And certainly, there’s a lot more conversation with ChatGPT out there and OpenAI, but there are already areas where it’s in play.

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